Flooring Company Workers' Comp: Class Codes, Audits

For a flooring company, workers' compensation is priced from payroll in the class codes the insurer assigns to your work. After the policy year ends, an audit checks the estimate against what you actually paid and adjusts the bill. Carpet and resilient flooring, wood flooring, tile and a retail showroom can each be rated differently, so how you record payroll by type of work, and how you handle installers paid per job, drives the bill. This guide is for the buyer who inherited installers, sanders and a showroom crew and wants to understand the codes, the audit and the seller's experience mod (a multiplier built from past claims) before the invoice arrives.

The short answer

Class codes follow the work the business does, not each worker's job title. Codes vary by state and rating bureau, and the insurer assigns them.
A company that installs carpet, hardwood and tile may need payroll split across classes, and only job-level time and pay records support the split.
Pay to uninsured installers can be added to your premium base at audit, and a certificate of insurance is the usual way to keep it out.
The seller's experience mod generally follows the business to you, and the insurer expects notice of the sale within 90 days.
In North Dakota, Ohio, Washington and Wyoming, workers' comp comes from a state fund, and employers usually add stop gap cover (employers liability, which a state fund does not include).

What do flooring crews do, and why does it matter to the insurer?

Underwriters ask what each person physically does. Federal job profiles describe four core flooring jobs, each with different renewal questions. They describe the occupations across all employers, not your company.

Flooring jobs and what a federal job profile reports
Job	Why the insurer asks
Carpet installer	Cutting tools and heated seaming irons lead to cut and burn questions, and removing old carpet and padding brings dust and contaminants
Resilient floor layer	Most of the day is kneeling and fitting, and the profile reports contaminant and hazardous equipment exposure far less often than for sanders. Torches and adhesives still lead to fire and fume questions
Floor sander and finisher	90 percent report daily contaminant exposure and 59 percent daily hazardous equipment exposure, so expect dust, fume and machine questions
Tile and stone setter	91 percent wear protective equipment every day, and cutting tile and concrete leads to silica questions

Showroom staff, estimators, dispatchers and delivery drivers have different duties and are not described by those profiles. Ask your insurer how it treats each group.

How do class codes work for a flooring company?

In most states, workers' compensation premium is a rate per $100 of payroll for each class, times the payroll in that class, with the experience mod then applied. The insurer assigns the class, and which rating bureau writes the rules decides how finely flooring is split. Most states use the National Council on Compensation Insurance (NCCI) system. About eleven states run independent bureaus, and California, Pennsylvania and Delaware classify differently from NCCI, so codes from NCCI material do not carry over directly.

The Massachusetts bureau's scope text shows how finely flooring can be divided. These are examples from one bureau, not the code for your business or state.

How one bureau (Massachusetts) splits flooring work
Work	Massachusetts class	What the scope text says
Resilient flooring, carpet, linoleum, vinyl, asphalt or rubber tile	5478	Also covers artificial turf installed over areas like patios. All other types of interior flooring are separately rated
Finished wood flooring and floor sanding or scraping	5437	Includes installation of parquet. Laminate wood flooring by specialist contractors is assigned here, not to 5478
Ceramic tile, stone, mosaic or terrazzo	5348 inside, 5022 outside	Rated separately from carpet and resilient flooring

Bureaus word their scopes differently. One public class-code lookup, for example, places laminate flooring in a different class than the Massachusetts text does. The same lookup shows separate California classes for hardwood floor laying and for floor covering stores, which California's own bureau should confirm. Ask your insurer which class it assigned to each operation and why. See class code corrections and the class code glossary entry.

What if the crew installs carpet, hardwood and tile?

Classes attach to the work the business does, not to a worker's job title. If one person does several kinds of work, some manuals let that person's pay be split across classes, but only with records of actual time and pay in each class. Estimates or percentages are not accepted, and one published manual puts all of the employee's pay in the highest rated class involved when those records are missing.

If the actual work does not match the classes on the policy, the insurer can assign the right classes by endorsement, which changes the audited premium. A company that grows from carpet into hardwood sanding or tile may find those operations rated elsewhere.

A hypothetical example. An installer spends 600 hours on carpet and 400 hours on tile in a year, but the time sheets say only "installation." At audit the insurer asks for records that show time and pay in each class. Without them, the whole 1,000 hours of pay can go into the higher rated of the two classes. In a state that rates these operations separately and permits a split, a column for work type on each job ticket lets the pay split by actual hours. A work-type column is a low-cost record that supports the split at audit.

How do installers paid per job affect the audit?

Some flooring companies pay some installers by the job, and whether each is an employee, an insured subcontractor or an uninsured subcontractor decides what lands on your premium. The premium base is the payroll your premium is calculated on. Under the standard policy, it includes pay to your officers and employees and pay to all other persons engaged in work that could make the insurer liable. The exception is proof that the person's own employer lawfully secured workers' compensation, usually a certificate. A certificate is evidence, not the whole test. In some states a business that hires a subcontractor can be treated as the employer of the subcontractor's workers when the subcontractor has no coverage (a statutory employer), and state law controls.

Under NCCI's manual as published for North Carolina, an uninsured subcontractor's charge is classified as if the workers were your employees, and your mod applies. Other states and bureaus may differ. If you have no payroll records for them, the contract price may be used, with state-specific minimum shares.

Classification itself is a legal question: the U.S. Department of Labor calls misclassifying employees as independent contractors a serious problem, and states apply their own tests. Ask your attorney about the installers and your insurer how they will be treated. See 1099 workers and the audit, whether your subcontractors carry required coverage and collecting certificates from subcontractors.

How should a flooring company estimate payroll and get ready for the audit?

The premium you pay during the year is an estimate. The audit after the policy ends sets the final figure from actual payroll and the right classes, and under the standard policy the insurer can audit your records for up to three years after it ends.

Records a flooring auditor may ask for
Record	Why it matters at a flooring company	What to keep
Job tickets with a work-type column	Supports splitting one installer's pay between carpet, wood and tile classes	Hours and pay by job and by type of work
Installer file	Decides whether pay to per-job installers enters the premium base	Payment records, written subcontract terms, and a certificate of insurance dated before work starts
Store and installation payroll kept apart	A showroom and its own installers can be rated differently	Separate payroll codes for store staff and crews
Estimator and dispatcher duties	Decides whether any pay can sit in an office or outside sales class	A short written description of how each person spends the day

If you add a crew, lose a large builder account or move from carpet into hardwood or tile, ask your insurer whether the estimate should be revised before the audit. See payroll estimates and audit bills.

Does the seller's claims history follow me?

The seller's mod. In NCCI states it generally follows the business to you, in both stock and asset deals, if you take over all of the seller's operations. For a partial purchase it depends on whether the insurer can split out the data. Ask the seller for the mod worksheet and the audits for the same years, then see how to review the experience mod.
Notice. The insurer expects notice of the sale within 90 days. Late notice may be treated as an attempt to evade the mod, and a recalculated mod applies back to the date of the change under current NCCI rules, so late notice does not avoid a recalculation, which can move the mod down as well as up. NCCI can also revise up to two prior mods.
At closing. In an asset deal you generally need your own policy in force. In a stock deal the company's audit stays with it, including pre-closing payroll.

A professional employer organization (PEO) is another route to workers' comp. See PEO vs your own workers' comp.

Does my state change any of this?

Texas. Most private employers may choose not to carry workers' comp, but customer contracts and public-project rules can require contractors to carry it, so confirm before assuming you can opt out.
State fund states (North Dakota, Ohio, Washington, Wyoming). Coverage comes from the state fund, or approved self-insurance, and employers liability is not included, so stop gap cover is usually added.
Working owners. If you plan to install or sand floors yourself, ask your insurer whether owners and officers are included or can be excluded in your state, which class their pay would fall in, and what that does to the premium. The answer varies by state and policy.

For the wider picture, see what drives insurance cost for a flooring company.

Keep reading

Frequently asked questions

What workers' comp class code applies to a flooring company?

It depends on the state, the rating bureau and the work. One bureau splits carpet and resilient flooring, wood flooring, tile and retail stores into different classes, while other bureaus word their scopes differently. The insurer assigns the code, so ask which class it used for each operation and why.

Do my installers need to be on my workers' comp policy?

It depends on state law and on whether each installer is an employee or has an employer that carries its own coverage. Collect certificates before work starts and ask your insurer and attorney about each arrangement.

Will the seller's mod follow me if I buy through a new LLC?

Generally yes in NCCI states, if you take over all of the seller's operations. Under current rules the experience transfers in both stock and asset purchases, and dropping it is rare. The rating organization decides. Report the change within 90 days.

How can I avoid a surprise workers' comp audit bill?

Keep payroll records by class, track job-level time for mixed work, file certificates for every subcontractor and tell the insurer when payroll changes. The audit sets the final amount.

If an installer hands me a certificate, am I off the hook?

Not always. The policy test is whether the person's own employer lawfully secured workers' comp, and a certificate is the usual evidence. State law on statutory employers controls, so ask your insurer and attorney how your state treats each installer.

References

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Send Morrow the declarations pages, loss runs and key contracts you inherited. Morrow can review them against the business you bought, flag gaps and request quotes where it makes sense. Any new terms depend on carrier underwriting.

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This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.

Workers' Comp at a Flooring Company You Just Bought: Codes and Audits